Gas Up $1 a Gallon

Daily News Article   —   Posted on March 26, 2010

(by Stephen Dinan and Kara Rowland, WashingtonTimes.com) – Gas prices have risen $1 since just after President Obama took office in January 2009 and are now closing in on the $3 mark, prompting an evaluation of the administration’s energy record and calls for the White House to open more U.S. land for oil exploration.

The average price per gallon across the U.S. hit $2.81 this week, according to the Energy Information Administration. That was up from $1.81 the week of Jan. 26, 2009, just after the inauguration, and marks the highest price since Oct. 20, 2008.

John B. Townsend II, a spokesman for AAA Mid-Atlantic, said price increases are a result of the cost of crude oil, thanks to a decision by the Organization of the Petroleum Exporting Countries not to raise production even as economic growth in countries such as Russia and China spurs more demand.

“From all indications, we’re going to see $3 gas again this summer,” he said. …..

Gas prices have been on a roller-coaster ride over the past decade, dropping to near $1 after President George W. Bush’s first year in office, crossing the $2 mark in 2005 and reaching $4 in June 2008 before Congress and Mr. Bush took action, lifting presidential and congressionally imposed moratoriums on expanding offshore drilling on the Outer Continental Shelf.

Mr. Bush lifted the presidential moratorium in July that year. The congressional moratorium expired Sept. 30, and prices fell precipitously, dropping more than $1 in October.

“The reason that it dropped is because the U.S. sent a signal to the markets, by dropping the moratoria, that we’re going to drill on our lands. Obviously, we never followed up, and thus you see the crisis gradually rising,” said Rep. Doc Hastings of Washington, the ranking Republican on the Natural Resources Committee.

He said the solution is the same for both the short-term and long-term prices: Assure the markets that the U.S. will pursue domestic exploration.

Presidents have little direct control on the price drivers pay at the pump, but that doesn’t insulate them from taking blame. Mr. Bush faced harsh criticism as gas prices rose past $3, and Mr. Hastings said Mr. Obama is likely to face the same pressures if prices continue to rise.

Mr. Townsend said part of the problem for Congress and the administration is that speculators are betting on an improved economy, which is helping drive up prices. …..

Among the steps Mr. Obama could take to affect prices is to release oil from the Strategic Petroleum Reserve, which is designed as a last resort to accommodate a collapse in oil supply.

In May 2008, with prices averaging $3.70 a gallon, Mr. Obama co-sponsored an amendment in the Senate that would have forced the Bush administration to stop filling the reserve, which was not at capacity at the time. The amendment passed by a vote of 97-1, and a few days later, Mr. Bush reversed his own long-standing opposition and halted filling of the reserve.

Daniel Kish, senior vice president for policy at the Institute for Energy Research, an industry-backed think tank, said the administration also could open access to more U.S. resources, either on land or on the Outer Continental Shelf.

“There’s been no breakthrough on any kind of expanded access in the U.S. – in fact, it’s been just the opposite,” he said. “[Interior Secretary Ken] Salazar has basically put on the shelf any expanded drilling. That whole ‘drill, baby, drill’ thing from 2008, the president lifting his moratorium, the Congress lifting the moratorium in the appropriations bill, none of that has come to fruition.”

The Obama administration says it’s been diligent in offering leases. Administration figures show 55.8 million acres were offered for lease in fiscal 2009, including more acres in the Gulf of Mexico than any year of the Bush administration save for 2008.

Also, production of energy on federally leased lands, both onshore and offshore, grew 14 percent in 2009. The administration projects offshore oil production on the Outer Continental Shelf will grow by 20 percent next year.

But Mr. Kish said that increase was not a result of Obama administration policies but because of Congress, which in 2006 ordered that a large Gulf lease proceed. That finally happened last year.

Subtracting that, Mr. Kish said, Mr. Obama offered fewer acres for lease in fiscal 2009 than any other president in the past 20 years.

Copyright 2010 News World Communications, Inc.  Reprinted with permission of the Washington Times.  For educational purposes only.  This reprint does not constitute or imply any endorsement or sponsorship of any product, service, company or organization.  Visit the website at washingtontimes.com.

Questions

1. a) How much was the average price of gas per gallon across the U.S. in January 2009, just after President Obama’s inauguration?
b) What is the average price of gas per gallon today?

2. Many times presidents are blamed for rising gas prices. What does John Townsend of AAA say is the cause of such high gas prices?

3. a) Define moratorium.
b) What did President Bush do in June 2008 about the moratorium on expanding offshore drilling on the Outer Continental Shelf?
c) Why did this action result in a drastic drop in gas prices?

4. a) What is the Strategic Petroleum Reserve?
b) What past action by then Senator Obama indicates that he might now as President release oil from the Strategic Petroleum Reserve in an effort to lower gas prices?
c) Would you support this course of action? Explain your answer.

5. a) What other action could President Obama take that would affect gas prices now?
b) Would you support this course of action? Explain your answer. 


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Background

The Strategic Petroleum Reserve is a U.S. Government complex of four sites with deep underground storage caverns with a capacity of 727 million barrels created in salt domes along the Texas and Louisiana Gulf Coast that store emergency supplies of crude oil.

The Minerals Management Service

  • The Minerals Management Service (MMS), a bureau in the U.S. Department of the Interior, is the Federal agency that manages the nation’s natural gas, oil and other mineral resources on the outer continental shelf (OCS). 
  • MMS’s mission is to manage the ocean energy and mineral resources on the Outer Continental Shelf and Federal and Indian mineral revenues to enhance public and trust benefits, promote responsible use, and realize fair value.
  • The agency also collects, accounts for and disburses more than $8 billion per year in revenues from Federal offshore mineral leases and from onshore mineral leases on Federal and Indian lands.

Resources

For more information on the Strategic Petroleum Reserve, go to the U.S. Dept. of Energy website at fe.doe.gov/programs/reserves/spr/spr-facts.html.

Read about the Outer Continental Shelf Lands Act at mms.gov/aboutmms/ocs.htm.

For information on leasing on the Outer Continental Shelf, go to gomr.mms.gov/homepg/offshore/offshore.html.

Read about offshore oil drilling at earthsci.org/mineral/energy/gasexpl/offshore.html.